Digital currency exchange ShapeShift has announced it has suspended service to all residents in New York state following the Department of Financial Services’ release of its BitLicense.
In a press release provided to CoinReport, the company said, “NY’s new anti-competitive licensing scheme, which targets a wide swath of digital currency and blockchain-based financial firms violates consumer protections and put users at risk.”
ShapeShift raised concerns about the risk of hackers of identity theft BitLicense poses.
“Identity theft is an epidemic, more costly to society than many other forms of theft and crime,” said ShapeShift CEO Erik Voorhees in the press release. “It is pervasive because the antiquated financial system–based on credit cards and banks–only works when personal information is attached to your transaction. Bitcoin has finally solved this problem, by enabling 100% secure transactions without attaching your private information. Now, New York wants to mandate that consumers continue to be put at risk, even though technology has provided a solution to identity theft.”
In response to BitLicense, ShapeShift is rerouting all website traffic from New York to a new initiative called PleaseProtectConsumers.org and encouraging other digital currency firms to do the same. The website offers an overview of the identity theft problem in the U.S. and asks New York residents to contact their representatives and media outlets.
“Since New York has mandated unethical and dangerous data collection of users, we have no choice but to suspend service to that territory,” said Voorhees. “We hope other jurisdictions will be less reckless with the private information of their residents. Finally digital commerce can be safe, if only regulators would let it happen.”
In an interview with CNBC, Voorhees said that efforts to prevent fraud, money laundering, and terrorism financing through “know your customers” provisions do not justify the risk of exposing customer to potential data breach.
“We’re not going to spy on thousands of people purely to make their job a little bit easier,” said Voorhees of law enforcement, challenging to practice of opening up consumers to possible identity theft to prevent drug money from “circling around.”
A Department of Financial Services spokesman said the agency anticipated some responses like the one from ShapeShift.
“We always recognized that there is going to be some part of this community that is against even pretty standard financial regulatory oversight measures, such as anti-money laundering controls and other consumer protections,” said the spokesman in a statement to CNBC. “That said, one digital currency company has already received a license from NYDFS and a number of others have stated they intend to seek BitLicenses shortly.”
The spokesman added, “Ultimately, we believe that prudent regulation will be important to building greater consumer confidence in digital currency and sparking wider adoption.”
Voorhees told CNBC that if authorities went through the proper channels to collect data from ShapeShift, then he would be willing to provide wallet address, IP logs, and data on which devices were used to access the exchange, but not names and addresses.
Images courtesy of ShapeShift